Software giant SAP plans to figuratively power its operations worldwide with 100% renewable electricity by the end of this year, according to its sustainability report released today. The move is aimed at helping the company offset its growing carbon emissions.

The company plans to buy renewable energy credits to achieve that goal, which is arguably the easiest and cheapest way to do it. This isn't the first time SAP has bought credits: it has been doing so since 2009, when it announced a plan to lower its carbon footprint to the 2000 levels by 2020.

But the software developer is staring at rising – not shrinking – carbon emissions as a result of the growth of its cloud computing business, where a growing number of its customers who previously used their own computers to run SAP software and store data are now using SAP's data centers instead.

SAP's carbon emissions grew 12% in 2013, the company said. Its emissions intensity also rose: in 2013, it generated 32.4 grams of emissions for every euro of revenue, compared to 30 grams per euro in 2012.

Three strategies to reach 100% renewables

There are three main ways for a company to boost its green power profile: buying credits, signing power purchase agreements, or installing solar power, wind power or other renewables onsite.

As more companies seek to show their sustainability commitments, a debate has emerged over which approach creates the biggest environmental impact. Some companies are leveraging power purchase agreements and their own renewable-energy projects to pressure utilities to invest in renewable energy risk losing more company business.

When a company buys credits, it's essentially buying a project's green attributes instead of the energy itself. The purchase helps support the project financially, and is cheaper than the other two options. But critics say the quality of projects varies widely, and these credits typically don't reduce the fossil-fuel power the company is actually using.

Meanwhile, with power purchase agreements, companies agree to buy power from the owner of a renewable-energy project. The electricity is either delivered directly to companies' facilities or, more likely, injected into the local grid to increase the amount of clean electricity in the power supply. A company that buys electricity directly can ensure that it's helping to displace fossil fuels with renewable energy in its local grid and can help increase clean-energy projects locally, either via utility or independent power producer.

Google has done this, for example, to ensure that its data centers are drawing electricity from a cleaner grid. A power purchase agreement typically runs for around 20 years, so it takes more commitment and money from the buyer.

When a company generates renewable energy on its own facilities, that can cost the most time and money upfront, depending on the size of the project. It requires companies to secure permits and financing, fight off critics and oversee the completion of a project. This choice, though, means the company can be sure it's using clean power at its office and factory and reduces demand for traditional electricity from the grid. It has the added benefit – for renewable-energy advocates – of pressuring utilities to invest in more renewable energy.

Why many corporations pick credits

Given that signing power purchase agreements and building clean power projects takes a lot more time and money, many companies, such as SAP, prefer to buy credits.

"We don't want to become an electricity producer. It's not our core business," said Jonas Dennler, SAP's global environmental manager, who added that the company might consider onsite generation in the future. "We want to partner with customers to buy the certificates from them."

Dennler declined to name the companies SAP plans to buy the credits or certificates from, and also declined to disclose the budget for reaching its 100% renewable energy goal this year. The company has solar panels installed at its headquarters in Germany and in its Silicon Valley office, but those make up less than 1% of its annual electricity consumption, which reached 320 gigawatt-hours in 2013.

SAP plans to buy credits from projects that are less than 10-years-old (this rules out big hydropower plants) and are built without government subsidies, Dennler said. The company is looking at buying a good chunk of credits from wind farms, mainly because wind power is generally cheaper than, say, solar power, and therefore relies less on government incentives.

Meanwhile, renewable energy proponents are pushing tech giants to go beyond buying credits. Power purchase agreements and onsite generation could persuade utilities to produce or buy more renewable energy in order to attract big customers.

Google pushed Duke Energy to do just that in North Carolina. And there's some evidence the strategy may be working: last November, Duke asked the state utility regulators for permission to sell clean power to corporate customers. It didn't hurt that another big corporate customer in the state, Apple, decided to build two solar farms – each with a capacity of 20 megawatts – close to its data center. The electricity from those farms flow into the local grid.

Even before this latest announcement, Greenpeace, which ranks tech companies' clean-power efforts, placed SAP as ninth among IT companies in its latest list, released April 2013. "It's great that SAP has good intentions, and we need to see more companies doing that," said Gary Cook, an energy campaigner with Greenpeace. "But it needs to have a longer strategy than to say we are carbon neutral because we wrote a large check to buy a lot of credits."